Blog

Common Misconceptions About Student Debt

The UCAS deadline passed at the end of January. Perhaps you decided to leave it because you’re worried about the cost of studying. Certainly, there is strong evidence to suggest tuition fees and loans alone put off a large number of prospective students. However, not everything you think you know about student debt is true. It’ll be a shame to let money alone prevent you from attending university. Here are some common misconceptions debunked.

Student Debt is for Life

Despite attempts by the government to change this, the rest of your debt will be written off if it’s not paid off within 30 years. No matter how much or how little you have paid off by this point, it will no longer be attached to your name. Assuming you graduate at 21 as most people do, that means by your 52nd birthday, your student debt will be gone.

… And Interest is Crippling

Interest is linked to inflation, so it’s technically not interest. This is not good news for people who’ve seen pay rises way below inflation in the last few years, but stories about debt with “crippling” cost attached is not true. This is not “Payday Loan” territory. It’s even lower than the costs attached to a traditional bank loan, often seen as the better deal so long as you keep up repayments. Plus, no matter how much interest you accrue, it is wiped out after 30 years.

The More Debt You Have, the Higher the Payment at the End

Your first thought is likely that you couldn’t afford to take out loans. However, this is not the case. While taking out more loans means more to pay back, your repayment plan on anything you take out is based on your income. Graduates will only pay 9% on anything they earn over the £21,000 threshold under the current scheme. For example, if you earn £24k, you’ll pay 9% of £3,000 each year which is £270 per year or £22.50 per month.

Student Debt is a Black Mark Against Your Credit Score

Everybody worries about their credit score these days. Without it, you can’t get loans, credit or credit cards, phone contracts or even most mortgages. But your student debt is irrelevant to your score. For obvious reasons (a hindrance from before you’ve even begun earning money), it’s not included. However, you should understand that it could affect your eligibility for a mortgage under necessary “affordability checks”.

You Can Avoid Repayment by Emigrating

The student loan system is designed to help you study and with low repayments that will eventually get wiped out for most students. But that doesn’t mean you can avoid repayments altogether by moving elsewhere. No matter where you live if you earn over £21k you must make repayments and the SLC will pursue you for repayments and updates on your personal circumstances.